WMATA is facing a budget gap – not just for this year, but a systemic and growing fiscal deficit.

Last year. the agency tested the waters for a long-term concession contract for parking services. In this concept, an outside partner would manage WMATA’s parking for a 50 year period, in exchange for either an up-front lump sum payment or recurring annual payments.

Despite the cancellation of the solicitation, the concept is worth digging into. I’ll have more on the concession concept (and other parking ideas) in a future post. First, some thoughts about park-and-rides generally:

In general, transit park and rides lose money.

The Transportation Research Board estimated the cost recovery of park and ride facilities for various transit agencies. Streetsblog’s summary shows most agencies lose money operating these facilities, and none come close to recovering the costs of building the facilities in the first place. TRB estimates that WMATA is among the best transit agencies in recovering costs, but still doesn’t break even. WMATA brings in about $45 million in annual parking revenue, enough to cover only 66% of the estimated parking costs for the agency.

Because the TRB did not have access to actual operating cost data, their cost recovery estimate is based on a series of assumptions about amortized capital costs (including construction) and ongoing operating costs. The author of Let’s Go LA did a similar exercise for park and ride economics, setting up a scenario to show a revenue-positive park and ride requires a) charging parking fees, and b) filling the parking lot/garage every day with paid parkers (and fare-paying riders):

As one might expect, free parking loses money for the agency. Since the service cost is greater than the fare, the cost of building the parking is entirely a loss. If the agency can charge a modest amount for parking, in this example $3, the surface lot turns into a little bit of a money-maker. $298k/year is not a huge amount of money, but it’s something, and this option actually performs better financially than the single-family housing or townhouse options.

Due to high capital costs, a parking garage can be either a big winner or a big loser. If the agency can charge $5 for garage parking, the result is a loss of over $8m/year, but if it can charge $10, the result is almost $4m/year in profit, by far the best option. Note, however, that this is dependent on the ability to consistently fill a nearly 1100-space parking garage at $10/day. There are some locations where this will pencil out, towards the edges of the city and some commuter rail stops. (People might pay $10 to park downtown, but then they won’t even bother to ride transit, which is sort of self-defeating from a transportation and land use policy perspective.)

It’s worth noting that transit agencies have competing and conflicting priorities here. Often, the goals aren’t explicitly stated. If the goal is to maximize ridership, free parking could make sense. For a budget-constrained transit agency like WMATA, however, maximizing overall revenue means a different approach.

Parking isn’t the only option:

The main point of Let’s Go LA’s hypothetical is to tackle the opportunity cost of parking – what about the potential for other investments, such as housing? What potential does real estate development have for improving ridership and improving the transit operator’s bottom line? Let’s Go LA concludes (emphasis added):

[P]lease note that this is a very rudimentary analysis and does not account for benefits and impacts to other policy goals. For example, a 5445-space parking garage might be a winner for the agency, but if it’s not located close to a freeway, it may cause a lot of neighborhood congestion. Building housing creates the opportunity for more people to live in the city, while building parking only creates the opportunity to live somewhere else and drive. And of course, parking lots and garages create border vacuums and dead zones in the city fabric, which is undesirable.

Bottom line: park and ride lots may make sense in suburban and exurban areas if parking fees are enough to cover the cost of lot construction and help subsidize transit operations. Otherwise, build more housing.

While the specifics may vary depending on the variables, it’s hard to argue with the conclusion. One potential catch: the market must support building more housing at that particular location. Here, specific agency policies might discourage the redevelopment of surface parking lots. Requiring that any redevelopment replace the existing parking is

TRB’s survey of transit agencies found several (including WMATA) with a policy to replace all parking spaces lost to development on a 1-1 basis. While this may still be the official policy on the books, WMATA has been flexible recently and explicitly embraced the idea of additional real estate development at stations increasing overall revenue for the system.

WMATA’s parking payment uses the same SmarTrip card, and thus can tell if the same card was used for a transit trip at the station. Transit riders at New Carrollton pay $5.10 per day to park; non-riders pay $8.85 per day. It’s worth noting that even this scenario doesn’t hit the assumptions in Let’s Go LA’s garage scenario of a 100% full garage with riders paying $10/day to park.

WMATA’s current park-and-ride role:

Across the system, approximately 26% of WMATA’s trips are park-and-rides. WMATA periodically conducts an extensive survey of riders. Thanks to the parking payment system, they can ground-proof the survey results to parking payment. This data is from the 2012 survey:

Stations at the end of the line tend to be busier than parking garages at the penultimate station (indeed, one of the arguments for the New Carrollton joint development project is the plentiful parking available at Landover station). The end-of-line stations also tend to serve people driving from longer distances, while mid-line parking facilities tend to serve the local neighborhoods. Most terminal stations include large parking facilities.

The TRB paper includes a literature review of park-and-ride elasticity for price. Since so few transit agencies charge for parking, it’s hard to draw too many conclusions, but it does seem that many parkers are sensitive to price changes. A system-wide change in parking pricing might further reduce parking use at inner stations, making them more attractive for eventual redevelopment.

The document is part of making the long-term case for additional rail tunnels through downtown. In order to justify that expense, they are addressing some of the preliminary alternatives to squeeze more capacity out of the existing system (organization before electronics before concrete). From the executive summary:

As train and station congestion worsens, a question logically posed by stakeholders and the public is” “Why can’t Metrorail add more trains to relieve the crowding?” The fundamental purpose of this White Paper is to present the root causes of Metrorail capacity constraints that limit service expansion in the core.

One thing that jumped out at me was the suggestion of procuring new rail cars with more doors and wider doors – a suggestion I’ve made before. More doors can better handle boarding and alighting, reducing station dwell times, and thereby improving both capacity and reliability. The benefits are substantial (emphasis added):

[T]he benefits in terms of reduced dwell times for a 60 second dwell time would likely be in the range of 8-12 seconds (a 20-30% reduction in that portion of the dwell associated with passenger alighting/boarding with no effect on the base door cycle time dwell component of about 20 seconds). Assuming all cars of all trains have four doors per side, this is equivalent to a throughput gain of about 2 trains per hour.

Despite the obvious benefits of this change, the white paper downplays the potential for increasing the system’s overall capacity. Addressing them one by one:

As shown in Table 9, relative to car length, the boarding and alighting capacity of Metrorail vehicles closely matches the capabilities of peer systems’’ vehicles. WMATA’s rolling stock matches the median of those sampled for both the number of doors per unit car length, and the total door width per unit car length, though both of these values are slightly below the mean. While procuring or modifying vehicles to increase the number and size of doors may conceivably increase the rate at which passengers could board and alight, it would be an unconventional method for increasing total passenger carrying capacity.

I wouldn’t agree with the statement that all of these railcars closely match. In the rightmost column (inches of door width per foot of car length), you’ll see that the busiest of WMATA’s peers have a door capacity 50% greater than WMATA, or more. The difference between WMATA’s 2 in/foot and Toronto’s 3.2 in/foot is huge.

Second, the major benefit to adding more doors isn’t an increase in absolute capacity, but to improve reliability and the passenger experience. More doors means a smoother flow of passengers on and off trains. Faster station dwells, particularly at crowded transfer points, reduces the likelihood of passengers holding doors or missing a train because of a lack of time to board.

Next: the time required to make this change.

Although this rolling stock change could be implemented incrementally as each Metrorail fleet type is retired, full implementation would require over 40 years due to the life cycles of the multiple Metrorail fleets.

Second, implementing a new railcar design with four doors per side would result in a net seat reduction of approximately 28 percent, requiring more customers to stand.

I’m not sure where this calculation comes from; a cab car (A-car) from WMATA’s 7000 series seats 64 with the current arrangement and 58 with a longitudinal-only seating array. Toronto’s Rocket cab cars feature a similar rail car size (75 feet long) and feature four wide doors per side; they still manage to provide 53 seats, representing a 17% decrease over the 7000 series seated capacity.

WMATA’s own actions show that seated capacity isn’t a primary consideration. WMATA has been slowly reducing the number of seats per rail car series and increasing standing room with each new version; the original 1000 series had seating for 82; the 2000 series sat 76 per car; the 5000 series seats 68, and the 6000 series seats 64.

Given the stated goal of this white paper to determine potential for long-term solutions to WMATA’s core capacity challenges, I hope they don’t discard the idea of adding more doors to the future railcar fleet. Combined with some other suggestions, there’s a great opportunity to improve both the system’s capacity and reliability.

Most of that growth came from migration, with most of the migrants arriving from other countries. The natural increase (net of births over deaths) accounted for 40% of the overall growth.

I’m a bit late in posting this news or any news (hence the New Year’s Eve post, getting one more in under the gun), in part because my wife and I have some personal news: we are getting ready to add to that ‘natural increase’ number for DC’s population in February, 2017. Look out, US Census Bureau. More babies coming to DC in the new year.

There’s no denying the mood swing in the District of Columbia following the election of Donald Trump to the Presidency of the United States. It’s been a somber week on the streets.

It certainly goes beyond the simple fact that Trump won just 4.1% of the city’s vote, or the fact that he represents the Republican party. His specific campaign of white grievance politics, xenophobia, and know-nothingness cut against the District’s civic values.

For ‘culture,’ starting from the premise that DC’s culture is solely defined by the handful of people working in the West Wing is never a good start for an article about city life in Washington. Likewise, asserting that the city was a rotting shell until the Obama family arrived is laughable.

Despite what anyone says, there’s absolutely no clear indication of what a Trump administration would mean for infrastructure or urban policy. The dog caught the car; nobody knows what will happen next. We’ll have lots of battles about the federal role in shaping our cities, but those battles will take place in a different, national context.

That doesn’t mean there isn’t opportunity here. There’s room for the District to step up and take the lead. If city leaders want to soothe concerns about the impact on the city’s economy or culture, then there’s no better time than now to take the reigns.

There Goes the Neighborhood is a podcast series from The Nation and WNYC.

It provides a look into the public perception of rezoning East New York. The reporters and producers get the emotional response on tape in a way you can only accomplish on radio, complete with all of the vocal inflections and intonation, putting a human sound on a complex set of issues.

However, a few criticisms:

For a podcast series about gentrification, the hosts don’t ever actually define what it is. This isn’t a knock against the producers, as gentrification doesn’t have a universally agreed upon definition to point to. By keeping things nebulous, the producers are able to capture the responses and reactions from New Yorkers without putting their thumb on the scale. They range from concerns about housing costs to new restaurants that don’t feel like they’re ‘for us.’ Cultural changes, economic changes, social changes – it’s all there.

However, much of the show focuses on the city’s response to this trend – NYC’s push for inclusionary zoning. Without defining the nature of the problem (gentrification), it’s very difficult to evaluate the effectiveness of the city’s response. Programs like IZ are focused on providing a specific kind of ‘proper noun’ Affordable Housing; newly constructed housing units offered at below market rates. The particular mechanism of IZ builds these units in exchange for additional development. IZ is predicated on a change to the physical environment of the city.

While the podcast talks a lot about race, class, and the challenges of a changing city, it never quite rounds the corner and asks the next question – if change is inevitable, what kind of policy response is appropriate (and is New York’s response adequate)? How should communities look to manage change?

It’s clear that the reporters are interested in telling the human story of people facing eviction, watching their neighborhoods change before their eyes. But in discussing a major change to the city’s zoning policy, the podcast series has very few interviews with the public officials involved in crafting that policy (I only recall one quote from Vicki Been referenced in the final wrap-up episode).

Perhaps my background as a planner tunes my ear to things like this, but there are other small mistakes regarding the policies that shape a city’s housing stock. Zoning is the big one. In episode 4, they discuss New York’s 1916 zoning code, noting the results proved so popular, and property values increased – “and developers have been manipulating the zoning process ever since.”

I might argue with the greedy developers vs. civic minded interests framing; but the broad intent of zoning to preserve and increase property value isn’t wrong. However, they then add this: “DeBlasio’s innovation is to use zoning not just to facilitate growth, but to control it. That’s new.”

No, it is not. That is the very idea of zoning.

There are numerous references to a housing shortage and a housing crisis, but the entire series elides the overall demands for growth. They clearly document the change in the kind of people moving into the neighborhood, but don’t ever address the broader question of how to increase the housing supply in the face of growing demand. How should the city grow? If not here, then where? If the city doesn’t engage in shaping this physical growth, that won’t prevent the social fabric of the neighborhood from changing.

Despite these frustrations, these are important conversations to have. Taking action to fight gentrification will require building a political coalition; one that’s bigger than just the market urbanists or the anti-displacement activists:

I've argued for years that the new anti-exclusionary zoning crowd needs to hook up with fair housing advocates and go at it both ways

As the Metropolitan Washington Airports Authority continues work on Phase 2 of the Metrorail extension to Dulles International Airport and beyond, it’s worth considering some of the transit oriented development opportunities at the airport beyond just the obvious connection for passengers at the terminal.

Airports around the world take advantage of their connectivity in developing an airport city: office space, warehouses, hotels all diversify an airport’s business income. It’s a virtuous cycle:

real estate connected to the airport has value;

rents from those spaces diversifies airport revenues and drives down their operating costs;

lower costs encourage more airline service which increase connectivity around the world;

While that may be an ultimate goal, perhaps something closer to the Munich Airport Center (MAC) is a better match – particularly for any development in the Dulles parking bowl within Saarinen Circle. MAC is a pedestrian oriented retail and commercial complex connecting the airport’s two terminals and S-Bahn station, flanked by airport parking, buses, and a hotel. All of the key airport destinations feed pedestrians into the space: parking, taxi, drop-off, etc, increasing foot traffic to the retail spaces.

The most iconic element is the MAC Forum, a large covered outdoor plaza surrounded by shops and offices. The airport operator extensively programs the Forum with a variety of sponsored events to draw in non-airport patrons (for whom parking fees are waived) in addition to workers and travelers.

Entrance to the S-Bahn at the MAC Forum; CC image from Jeromyu on Flickr.

Munich Airport Forum; showing roof over the open air public space. Creative Commons image from Nir on Flickr.

The key elements of the Munich Airport Center include retail, restaurants, public space, and public transit. For adjacent development, the airport offers flexible office and conference space for rent (and is working on additional office development – they do not yet have planning permission for office space on the magnitude of Schiphol) as well as a connected hotel.

Saarinen Circle surrounds the surface parking lot directly in front of the Eero Saarinen terminal building. The Metro station (under construction) and parking garage are currently connected to the main terminal via a tunnel beneath the parking lot.

The Saarinen Circle site has several advantages. Space is plentiful (there was plenty of complaining about the decision to move the Metro station to the opposite side of the parking lot from the terminal), but the distances aren’t overwhelming: The distance between the garage and the terminal is similar to the distance between Terminals 1 and 2 at Munich. Development in the circle has the potential to make that walk a pleasant stroll among shops and public space, rather than through the drab-but-functional existing tunnel.

Because of the iconic Saarinen Terminal and the views of it for drivers approaching via Saarinen Circle, any development within the parking bowl couldn’t be very tall. Several historic preservationists objected to the Metro aerial guideway’s potential to block views. While this may foreclose on a large structure such as the one covering Munich’s Forum (after all, the canopy over the forum is the signature architecture for Munich’s airport – Dulles already has an icon), it shouldn’t stop all development. Using the existing tunnel level as the ‘ground’ floor would offer some room for development above. MAC is similarly surrounded by roadways and airport infrastructure at different levels.

Munich Airport Center makes good use of changes in grade to connect pedestrians between the terminals at multiple levels. Relocating existing taxi, bus, and valet parking to flank a new multi-level development between the terminal building and the parking garage/Metro station. The development not only has the chance to aid the finances of IAD by generating non-aviation revenue, but also in attracting more use to the Metro station via old-fashioned transit oriented development.

There’s plenty of developable land at Dulles, but only Saarinen Circle has the key location between the Metro station and the terminal. Airports around the world provide models for better uses of the space than surface parking.

The discussion hits on several topics about the challenges in transit map design, particularly for complicated networks. They also discuss objective measures of success in design (e.g. timing users in finding their way from point A to b on a map) and the conflicts with graphic design ideas. Another challenge is the future of the paper map and the seemingly inevitable move towards electronic map displays of some kind.

A few anecdotes stood out to me:

Touch Screen Maps: These might seem to be an obvious technological solution to mapping challenges with complex networks, frequent service changes, language barriers, etc. New York installed some touch screen maps as a part of a pilot program in 2014; despite rave reviews, no one seemed to use them. The podcast conversation (at 37:50) hits on the problems: the ad-supported model means the kiosks look like ads. Perhaps more interesting is the embarrassment of a rider using the kiosk, requiring a level of interaction that physically signals to everyone else on the platform that ‘I don’t know where I’m going.’ A static, printed map allows for consumption of information in a less obvious manner.

Station Names: Asked for examples of the worst transit maps they could think of, WMATA’s marathon-length station names are an obvious choice (at 1:07:20). Short station names are important to efficient, clear, and effective wayfinding. Roberts on WMATA’s map: “some of the stations – they’re not station names, they’re committee meeting minutes.”

File that one under “it’s funny because it’s true.”

Using the map to influence routing: Roberts obliquely mentions working with WMATA (48 minutes in) on changing the map to encourage different routing, presumably a reference to adjusting the map in order to encourage Blue Line riders from Virginia to transfer and use the Yellow Line (with excess capacity) to travel into DC.

It’s one thing for the map (or trip planner) to influence your route; it’s another for that decision to be made by an algorithm completely removed from human interaction. With driverless cars, it’s still unclear how humans will react to navigating networks in that way – adjusting human behavior is challenging enough.

Elevated pedestrian walkway linking Tysons Corner Center with the Metro, bypassing heavily used auto thoroughfares. Future development (replacing the parking garage visible to the left) will add more elevated pedestrian-only connections to the Metro. Photo by Alex Block.

Is there a future for the skyway in American cities? Unlike retrofitting a new layer onto a well-established street grid and development pattern (as in Minneapolis), there’s an opportunity to use an extra pedestrian layer as a tool to help re-make suburban edge cities into places navigable by pedestrians.

There’s a common thread of unrealized grand visions. Victor Gruen’s plan for Downtown Forth Worth (1956) called for pedestrianizing the downtown, providing automobile access from a ring of parking garages accessed via skyways. The virtue of the plan was flexibility – the elements allowed for incremental implementation of the concept. Yoos and James write:

Gruen’s urban design proposals introduced something that could be described in contemporary terms as a form of tactical urbanism: a vocabulary of adaptable components, such as pedestrian bridges, plazas, and arcades, that could be deployed selectively. Construction could thus proceed incrementally, radically changing a city over time. Gruen’s plan for Fort Worth proposed to reorder the city around a central pedestrian plaza with shop­ping. Vehicles were relegated to the periphery, and elevated pedestrian bridges connected parking ramps to the walking zone at the urban core. Although it was framed within a compelling narrative that referred to everyday life in historic European cities, Gruen’s alternative was distinctly modernist.

The potential pitfalls of that approach were evident to Jane Jacobs from the start, with her prescient observation about the impact of a partial implementation:

While she broadly endorsed Gruen’s social programming, she warned that clients and others who enacted his plans would overlook that critical point, focusing instead on his strategies for traffic management. And as she predicted, Gruen’s model for incremental development proved tenuous as his proposals — or something like them — were built in cities across the country. Local governments implemented only those components that were desirable at a given time to particular political constituencies, with little regard for the whole. The concept of a vehicle-free center was often abandoned as the cities evolved. The socially-oriented urbanism that was so crucial to Gruen’s vision demanded a more integrated and comprehensive approach.

Indeed, this was my personal experience with skyway networks growing up in Minneapolis. The skyways provide climate controlled, grade separated pedestrian circulation. The provision of skyways allowed the city to use street space for vehicle movement, relegating pedestrians to inhospitable sidewalks or to second-level skyways that require navigation through a warren of privately owned and controlled spaces.

Conventional wisdom in Minneapolis holds that despite the drawbacks of the skyway system, it was a necessary move for downtowns like Minneapolis to make in order to compete against ascendant suburban shopping malls – such as Victor Gruen’s own Southdale Center. The flaw in the approach is for a naturally walkable and compact downtown to try and beat an auto-oriented shopping mall at its own game – it requires an assumption that the streets must prioritize car movement to compete with freeways.

Yoos and James close with observations from Hong Kong, where the logic of separating pedestrians and cars ‘works’ best; combined with the required density to achieve critical mass (something often lacking in Minneapolis), challenging terrain requiring vertical pedestrian movement in any context, and a great deal of redevelopment activity to re-shape the city as a multi-layered place:

Yoos and James note that one factor to Hong Kong’s success with the strategy is total commitment: “Hong Kong’s lack of a significant historic conservation agenda” and the government ownership of all land results in a more complete implementation of the concept.

In the United States, a comparison to Hong Kong has limited applicability. However, I don’t think that means the future for multi-layered cities is dead. Path dependence means places like Minneapolis won’t be tearing out their skyways anytime soon, but the future for the concept is probably in urbanizing edge cities like Tysons Corner.

The plans for Tysons involve a massive redevelopment of an auto-oriented edge city into a transit-oriented and walkable one. Both increased density and successful transit require good pedestrian access. Tysons already has islands of walkable places inside the malls and the plan calls for incrementally creating a new grid of streets as redevelopment proceeds.

Connecting those places to the transit system requires either taming massive suburban quasi-highways, or moving pedestrians over/under them in another way.

The first phase of redevelopment at Tysons Corner Center is adding a pedestrian layer above the traffic, directly linking the Mall’s second level to the mezzanine of the rail station. A new hotel faces onto the pedestrian plaza, with loading and valet parking located one level below. The natural topography allows for a person to walk from the Metro station to the plaza (via a pedestrian bridge) to the mall on a single level, with auto movement below.

For the Mall, the additional development adds new uses (office, residential, hotel), stepping towards fulfillment of Gruen’s vision of a mixed use town center. Restaurants and bars dominate the new retail offerings, fronting onto the plaza as an attempt to create a sense of place as well as a functional pedestrian connection.

The sturm und drang over putting the Metro underground in Tysons missed the challenge of mixing pedestrians with suburban arterial roads. The elevated rail structure isn’t the obstacle to creating a walkable place – the cars are. And skyways might help provide a working alternative.

A few thoughts on the good and bad of the line and RTD’s rapidly expanding system, starting with the not-so-good.

This line is part of Denver’s large FasTracks system expansion. While ambitious in scope, many of the routing decisions are odd network choices. There’s a lot of reverse branching, use of freeway rights of way, and other opportunistic decisions to ease construction, but which may be regretted later.

Real estate development projects advanced before any understanding of the transit right of way needs, and have now forever closed those avenues for expansion. The real estate framework for expanding Denver’s downtown matured before the framework for transit expansion.

Rail service to Denver’s airport is important, but commentators often place too much emphasis on serving airports instead of overall improvements to the transit network. This is less true for Denver, given the systematic transit expansion as a part of FasTracks (and the network benefits therein).

Critiques aside, there’s a lot to praise with the airport line.

Frequent, all-day, electrified main-line rail service – much of it built in a greenfield right of way.

Development of new regional rail transit lines along greenfield right-of-way opens up all kinds of planning possibilities for other regions.

The project demonstrates the benefits of risk-sharing public-private partnership deals. With the contractor responsible for long-term operating costs, their design efforts focused on the most efficient way to meet the parameters of the contract (all-day, frequent rapid transit service). For those reasons, the team embraced the electric commuter rail concept, opting for:

Last Sunday’s Washington Post featured an article covering the ongoing saga between the Big Three US-based network airlines (American, Delta, and United) and the Middle East Three (Emirates, Etihad, and Qatar) airlines over the rules for air travel and the role for government in regulating it, as well as funding it. The intersection of air travel, the shape of the global economy, and the challenge of defining the role of governments in a globalized economy.

This fight is not just about legacy companies trying to hold market share against entrepreneurial upstarts — a dynamic in aviation since the likes of People Express fought to wrest a slice of transatlantic travel from British Airways three decades ago. Today’s Persian Gulf challenge is more fundamental, a new business model that relies on three tectonic shifts in global aviation: a gulf-ward lurch in the world economy’s center of gravity; a dramatic loosening of trade restrictions on where, when and how the world’s airlines can fly; and the emergence of the “aerostate,” where world-class aviation is a critical economic engine deeply integrated with the state itself.

While the shift of the global economic center of gravity is notable, the most interesting developments in this row concern geopolitics and global governance. Since last writing about this a year ago, there hasn’t been much regulatory action. The stakes are largely the same as laid out a year ago.

However, a few things have changed. While the US DOT hasn’t taken any action, both Delta and United cancelled their Dubai services. The service pattern is now entirely asymmetric – the ME3 serve thirteen destinations in the US, while American carriers serve none in Qatar or the UAE.

Dubai emerged as the archtype of the aerostate – where the lines between the airline business and government policy have blurred, even disappeared.

Ironically, the stated reason for United dropping their service between Washington Dulles and Dubai was the loss of the contract to carry US government employees and contractors, as required by the Fly America act. The winning bidder for the US government contract? Emirates, thanks to a JetBlue codeshare ensuring Fly America compliance.

Impacts of Regulatory Interpretation:

This case is an interesting example of the wide latitude for interpretation of broadly similar legislation. The intent of Fly America (and other rules like Buy America) is to keep US government spending with US-based businesses.

That winning contract will save those government employees a lot of money. The GSA’s interpretation of the Fly America rules is good for the government as a consumer – but at the cost of taking business away from a US-based airline in favor of a foreign one with an almost entirely domestic codeshare partner. In FY15, United Airlines’ contract with the GSA for IAD-DXB cost $979 per coach seat, and $7,114 per business class seat. Emirates/JetBlue won the FY16 contract with prices of $699 and $6,600, respectively. That’s a 28% savings for the government on the coach ticket.

Similar rules such as Buy America for transit projects include interpretation focused on ensuring taxpayer dollars are spent with US businesses. Unlike the Dulles-Dubai contract, where an American company offered the same product, many key transit projects rely on rolling stock that isn’t manufactured in the United States. Compliance therefore requires ‘final assembly’ at US factories, despite the bulk of the manufacturing taking place overseas.

This additional expense certainly creates some additional business, but does so at great expense – both by increasing the cost of rolling stock, but also by reducing the number of firms able to successfully win the contract and comply with the rules. It also makes the purchase of ‘off-the-shelf’ trainsets from foreign manufacturers effectively impossible. It also makes each railcar purchase a one-off design, complete with all of the associated development costs to de-bug and test a new design.

It’s worth considering how such similar laws can result in such divergent outcomes.